Supreme Court Frees States to Require Remote Retailers without a “Physical Presence” to Collect Use Taxes, Leveling the Retail Playing Field

Today the U.S. Supreme Court issued a 5-4 decision in South Dakota v. Wayfair, upholding South Dakota’s 2016 law that requires remote retailers whose in-state sales exceeded a certain threshold to collect use taxes. This decision levels the retail playing field so that states now can require online retailers to collect use taxes from customers under substantially the same rules as main street businesses.

Today's decision reverses the 1992 decision in Quill Corp. v. North Dakota. In Quill, the Supreme Court ruled that a state only could require a remote retailer to collect use tax from in-state customers to the extent that the retailer had a “physical presence” (e.g., employees or property) in the state.

Since the Quill ruling, internet sales have increased dramatically. As part of the Marketplace Fairness Coalition, Nareit has long argued that prior law created an uneven playing field between online sellers and brick-and-mortar retailers. In 2017, Nareit joined a coalition of industry groups in filing an amici curiae brief as interested parties asking the Supreme Court to hear the Wayfair case, as well as a merits brief, asking the court to uphold the South Dakota law.